What I Learnt Losing £60,000 My First Year as a Full-time Trader
During my first year as a local (independent trader) on the floor of LIFFE, I bought and sold 8804 FTSE futures contracts, about 40 contracts per day on average. The result was a loss of £61,620 or -£267 per trading day. I was profitable on 55% of days with an average gain of £1009, my average loosing day was -£1780. My biggest one day gain was £7730 and my biggest loss -£12,426.
As you can probably imagine, this was a difficult time for me. I was trying to work out how to make money consistently. It was the consistency that seemed so hard to find. As you can see I was having a regular experience of making money, what was killing me were my losses. It seemed that every time I got ahead by £5-6000 over a period of a week or two, I would lose it all and a few thousand more in the space of a couple of days.
At the time I was too unhappy with my performance to be willing to spend any time analysing my results. If I had I would have discovered that during this period all I needed to do to go from a loss of £61,620 to a small profit would have been to avoid just 10 trading days. Those 10 days cost me a total of £69,169!
At the end of this period I was so frustrated, fed up and stuck that I decided to quit trading and return to a more secure career. It only took me a few weeks to abandon this plan and return to trading. I felt sure that I had the raw talent to become a consistently successful trader, what I needed, I reasoned, was some support. Support to stop me having the huge losing days that were crippling me financially.
I approached a firm I knew that backed traders on the floor and they agreed to back me with £20,000 of trading capital. We would split profits 60:40 and I was set an initial daily loss limit of £500. If I hit my £500 limit the firm's floor manager would come and tell me to go home. The third day trading I lost about £3500 and nothing happened, no one came to ask me to stop trading. I felt very foolish, but continued to trade for the remainder of the week while avoiding any contact with the floor manager. The following Monday (the week's losses had totaled about £5000) I got a message to meet with the director with whom I had made the agreement (it transpired he had been away the previous week). I was sure that he was going to say that the deal was off. Instead, to my surprise, he told me how important it was that he could trust me, he needed to know that when the market was volatile he could trust me not to be racking up big losses. He suggested that I start afresh. Needless to say I was both relieved and grateful. So I went back to the trading pit that morning with the determined intention to not loose more that £500.
The next two weeks turned out to be one of the toughest periods of my trading career and one of the most rewarding. Stopping when I was down was hard. I realised that what had been at the root of my large losses was my inability to accept loosing at all. To me loosing was unacceptable. Such was my intolerance for loss that I lost for ten consecutive days. But as the days progressed, even though I continued to loose £500 a day, I found my mood lifting. I actually started to feel OK about loosing as long as it was within my limit.
At the end of this 10-day period of losses a seeming miracle happened; I started to make money. My target was to get to +£1000 and then not give back more than 20% of my gain. So when I had a profitable day I was making between £800 and £2000, for an average of about £1200. Not only did I start to make money, I did so for 15 days in a row, three entire weeks without a loss.
This marked the beginning of a new era of trading for me. In retrospect, I believe that I had been trading scared, scared that I was really a looser. The two weeks of rigidly sticking to my loss limit caused me to revaluate myself. I started to feel good about myself for sticking to my limit. Before it was bad if I lost money, now it was only bad if I lost more than my limit. Before, I never knew whether I was going to make £1000 or loose £5000; now I knew that the worst case was a loss of £500 and that was OK. I started to see that sticking to my trading limits was a sign of strength and my confidence started to rise.
Looking back at my first year's loosing streak, if I had restricted my losing days to -£500 my loss of £61,620 would have turned into a profit of £83,525. Not only that, I think that had I been sticking to a loss limit during that period, my confidence would have been that much greater and my percentage of profitable days would also have been higher.
"Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our light, not our darkness that most frightens us. We ask ourselves: "Who am I to be brilliant, gorgeous, talented, fabulous?" Actually, who are we not to be? You are a child of God. Your playing small doesn't serve the world. There's nothing enlightening about shrinking so that other people won't feel insecure around you. We are all meant to shine, as children do. We were born to make manifest the glory of God that is within us. It's not just in some of us; it's in everyone. And as we let our own light shine, we unconsciously give other people permission to do the same. As we're liberated from our own fear, our presence automatically liberates others."
Whatever is at the root of our fear, in order to become consistently successful traders, we have to overcome it by developing trust in ourselves, trust that we will always act in our own best interest. When we trade fearfully, we undermine ourselves and end up taking the very action that confirms our fear. The question is how to develop an unshakeable trust in ourselves?
We develop trust in others through repeated experience of them acting in ways that inspire trust. In the same way we develop trust in ourselves as traders by building up a history of action that supports our goal to become consistently successful traders. The more frequently we adhere to our own trading plan and limits the greater our self-trust. Now this sounds like a catch 22 situation, if you find like I did that you cannot help yourself, how do you start to develop self-trust through right action?
In a way I was lucky, my back was against the wall, I knew that if I broke my limit I would be out. So I had to stick to my limit and in doing so I gave myself the opportunity to confront and finally reject my fear of being a loser. To go from being a net loosing trader to a consistently profitable one, we need to set ourselves achievable targets of behavior. My problem was allowing loosing days to turn into huge losing days, so to set myself the objective of stopping trading for the day when I was down £500 was appropriate for me. For others the primary problem can be the resistance to taking a trade when a signal comes up, be it intuitive or mechanical. An appropriate exercise would be to take a simple mechanical trading system (it does not have to be much good, break even would do) and set the goal of taking the next 10 signals without hesitation, regardless of how you feel. We need to build up our trading skills one at a time, when we are confident we can cut our losses we can move onto execution, then we can work on holding on to profitable trades etc. Tennis stars don't become stars just through competition; they hone their skills one by one on the practice court and they continue to practice throughout their careers. As traders we need to identify the individual skills we need to develop and focus on them one by one. Someone new to tennis does not expect to go out and win competitions straight away, they know they will have to spend a fair amount of time practicing and learning first. Short term trading, like tennis, is skill based, and those skills can be identified, practiced and mastered.
Forex Signal Services
What are Forex signals? Forex signals are paid services offered by some brokers and independent Forex annalists. Companies that offer forex signals monitor and analyze the market for you, providing you with their data via desktop alerts, email or even SMS and pager alerts.
How To Choose Wisely A FOREX Broker
Most traders use a FOREX broker to handle their transactions. What exactly are brokers? Strictly speaking, brokers are individuals or companies that buy and sell orders according the investor's decisions. Brokers earn money by charging a commission or a fee for their services.
How Currencies are Traded in the FOREX Market
Currencies are traded in dollar amounts called "lots". At 100:1 leverage, one lot is equal to $1000 which controls $100,000 of a given currency. This leverage is known as "margin" and some brokers will allow traders even higher leverage than 100:1. This superhigh leverage is one of the reasons that Forex trading has become so popular.
Why Demo Account Performance Is Often Better Than Real Account Performance
Over the past several years, the popularity of online currency trading has grown substantially. Each day, online FX brokerage firms attract new investors - each of them lining up with a glint in their eye, lured in by promises of easy money. Most of these companies allow you to sign up for a free demo account which lets you place mock trades using their trading platform to get a feel for the excitement of currency trading. In the casual world of free demo accounts - many young traders find they are able to garner impressive profits without a significant amount of effort. It almost seems too good to be true. But transferring this success from a demo account to a real account is far less common. Why is this? The actual trading platform behaves the exact same way, the market doesn't care whether you're a demo or real trader - so what is different? It's you who has changed. Not your personality, not even your trading style - but the factors that affect you are different.
Money Management, Part 1
There are some common mistakes I've seen traders make in the area of money management. First, let's understand what money management is all about.
Discovering Turnaround Candidates
There are many types of investment methodology out there. All of them has their own merits. I for one, personally like to invest in turnaround stocks. What is turnaround stocks? They are normally companies that are experiencing problems (hopefully short-term), and a lot of people are not willing to wait for those companies to recover.
Forex Market Overview
"FX" is an abbreviation of "forex" or "foreign exchange." Foreign exchange is the largest and most liquid market in the world trading approximately $2 trillion every day (that's over 30 times the daily volume of NASDAQ and NYSE combined). The forex market is a cash interbank/interdealer market. In simplest terms, this means the foreign currencies traded in the forex market are traded directly between banks, foreign currency dealers and forex investors wishing either to diversify, speculate or to hedge foreign currency risk. The forex market is not a "market" in the traditional sense due to the fact that there is no centralized location for fx trading activity and, therefore, trades placed in the forex market are considered over-the-counter (OTC). Forex trading between parties occurs through computer terminals, exchanges and over telephones at thousands of locations worldwide. CFOS/FX clients can trade through online forex trading platforms and/or over the telephone directly with a forex broker on our trading desk.
Online Stock Trading: Freedom of Trade
I remember the first time I started to trade online. It was just before the tech bubble of the late 1990's and the internet was still something new for most people. Purchasing the now forgotten company was easy, and I made a few dollars on that trade. It was so excitingly simple.
Where is the Market Going?
If you ask me whether the market will have moved up or down by this time next year, well I may as well flip a coin, because I don't know.
How To Handle A String Of Losses
Everybody hates to lose and unfortunately no one is blessed with the ability of foresight, therefore losses are an unavoidable part of trading. When we enter a trade we will either be right, or wrong, and even if we broke-even we'd still be classed as being wrong - as nobody enters into a trade just to break-even! When unsuccessful traders encounter a string of losses they begin to engage in self-destructive patterns that help them escape the pain they are experiencing.
Getting a Forex Trading Education
Many Americans are interested in getting involved in forex trading. Before doing this, you should get a forex trading education. You should never get into forex trading without forex trading education. With the proper forex trading education, you can be on your way to making a tidy profit.
Advantages of Trading FOREX Over Stocks and Commodities
There are many advantages to Trading FOREX as your main income generator. Let's start by something that may be worrying you already.
Money Management - The Holy Grail Of Trading
Money management determines how much to risk on each individual trade. This is a vital element of any trading system - risk too much and the chances of going bust are too high, risk too little and the reward for trading is too low.
The following situation happens quite often to many traders. Look it over and see if it has been happening to you:
Commodity Trading - Advantages and Disadvantages
What Is Commodity Trading?
Q1: When you consider that the foreign exchange market has become the world's largest financial market, with over $1.5 trillion USD traded daily, where does it go from here?
Learn Forex Trading - a Guide for Beginners
One can learn forex trading as easily as one would like to learn other subjects or train in other professions. The criteria for learning forex trading is an analytical / logical bent of mind and some number crunching abilities. Reading specialized books on the subject matter, enrolling for college and other programs, which specifically teach one to do forex dealing, one can understand Forex trading. Still other ways are through the Internet and training under a forex dealer / professional. Essentially the forex market comprises of currencies, which are bought and sold according to certain parameters.
Forex Training: Follow Your Gut or Your Broker
Which way will the forex market move? Do you just follow your gut feeling? Or do you have Neo's sixth sense that would let you be one with the market and feel the underlying currents.
Example of a Profitable Transaction in FOREX
To make a profit, in the FOREX, a trader can enter the market as a *buy position* (known as going "long") or a *sell position*(known as going "short").
How Do Other Countries Devalue Their Currencies?
Countries devalue their currencies only when they have no other way to correct past economic mistakes - whether their own or mistakes committed by their predecessors.
|© Athifea Distribution LLC - 2013|